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Superfunds May 2015
limit of $120,000 each year. Using the minimum
drawdown factor for a person aged 65 to 74, this
would require a superannuation balance of $2.4
million.
These estimates are based on the idea that
people will own their own home by the time
they reach retirement. However, a significant
proportion of future retirees will continue to
live in private rental accommodation during
retirement. Taking this into account, together
with the need to deal with the financial risks
associated with both increased longevity and
future medical and aged care costs, ASFA believes
an account balance of $2.5 million should be the
starting point where concessional tax treatment
could begin to fall away. Therefore, ASFA will be
looking at potential policy solutions that address
the tax treatment of very high account balances
as part of its submission to the tax discussion
paper.
IMPACT ON THE COMMUNITY
The community is highly sensitive to
superannuation policy changes, which is why
canvassing any changes, particularly in the short
term, must be mindful of community reaction and
potential community behaviour. Changes that are
made without notice, with no clear public policy
rationale and that affect the majority of members
greatly reduce consumer confidence. By contrast,
changes that increase the perceived equity and
fairness of the superannuation system are
generally considered acceptable by
the community.
Most people will never be able to accumulate
an account balance anywhere near $2.5 million,
so aiming tax changes above this amount will limit
community reaction. It is also fair to say that most
individuals who have super above this amount
should have limited objections to paying a small
amount of additional tax, particularly when they
have received considerable tax concessions in the
past on the contributions and investment earnings
that enabled them to accumulate such large
account balances.
Importantly, the message to the community
needs to be that the more we address the
equitable treatment of very high balances, the
more scope governments will have to provide
assistance to people with low balances
to build their retirement savings.
Lisa Chikarovski is manager – consumer strategy,
media and public relations at ASFA.
High account balances:
the facts
Around
70,000
individuals currently have
superannuation accounts
with balances in excess of
$2.5 million
Average annual income
of people with more than
$2.5 million in super:
in excess of
$180,000 a year
45,000
are in SMSFs
the rest are in
pooled vehicles
&
Around
4,000
SMSFs
have account
balances in excess
of $5 million,
while around
1,000 have more
than $10 million
The bulk of these accounts are
likely to be in the pension phase,
where no tax is paid on
investment earnings.
Do you have something to say about
this article? Let us know. Email
superfunds@superannuation.asn.au